80k interest paid monthly - best place?

jamescredmond

a member of my family has just received 80k (no tax liability). he wants to invest with zero risk and receive the interest monthly to assist income.
he receives a 3/4 state pension. any suggestions most welcome.

Paul_-C-

You could get around £240 a month (after basic tax) in interest if you put it in a high interest (5%) savings account.

Robert_Sterling

Paul_-C- wrote:

You could get around £240 a month (after basic tax) in interest if you put it in a high interest (5%) savings account.

£80,000 @ 5% gives £4000 interest per annum.
This income would be taxed at 20%
So £3200 Net £266.66 per month.

dparky

Looking at Halifax's online calculator it shows this for 80k:-

£2,944.00 for a year after tax.

£18,659.07 for five years fixed at a rate of 5.25%.

Can someone answer me this....

Looking at Halifax's web saver, the maximum you can have in it is £2 million and the interest you would gain on £2 million is this:-

£73,600.00 per year after tax.

Thats more than £6100 a month. My question is, could the bank afford to pay that?

dunstonh

£80k in a bank account is not zero risk. It may say £80k on the passbook but watch the cost of living eat into it over time.

There are investment products out there with varying degrees of capital security which could offer better returns (either in reality of potential). Zero risk doesnt say what you really want. It just says I dont understand what I am doing and need help.

cheerfulcat

jamescredmond wrote:

a member of my family has just received 80k (no tax liability). he wants to invest with zero risk and receive the interest monthly to assist income.
he receives a 3/4 state pension. any suggestions most welcome.

If he takes the interest as an addition to his income, his capital will be losing its spending power pretty rapidly; make sure that he understands the concept of inflation risk.

...Thats more than £6100 a month. My question is, could the bank afford to pay that?

Of course they could, but do you really think that the Halifax would let you keep £2 million in cash in a Websaver account? They would have you tortured with invitations to see their investment adviser...

patwa_2

Hi. I don't mean to hijack this, but my question is along the same lines.

My friend is due to be paid £100k in August. He wants to invest it in an account, and have the interest from that account paid into ANOTHER account (his normal spending account) every month. Does anyone know if this is possible? I guess it would have to be a personal arrangement with teh bank, or could it be a standing order as the interest would be the same each month?

Cheers and take care.

Hussein.

cheerfulcat

patwa wrote:

My friend is due to be paid £100k in August. He wants to invest it in an account, and have the interest from that account paid into ANOTHER account (his normal spending account) every month. Does anyone know if this is possible? I guess it would have to be a personal arrangement with teh bank, or could it be a standing order as the interest would be the same each month?

Hi there,

Yes, perfectly possible, in fact most savings accounts offer the option of having the interest paid to another account. But your friend should also be aware that by consuming interest he is risking his capital. If he needs a long-term income from this money it would be better invested somewhere where it can ( at least ) preserve capital as well as provide an income.

HTH

Cheerfulcat

jem16

cheerfulcat wrote:

Of course they could, but do you really think that the Halifax would let you keep £2 million in cash in a Websaver account? They would have you tortured with invitations to see their investment adviser...

Well that's certainly true and I don't have anywhere near £2 million.

I went in last week to pay in some cheques and as usual I was asked if I would like to speak to an adviser. I politely said "No thanks, I have an IFA who does that for me". She then had the cheek to reply, without knowing anything about my circumstances, "I'm surprised to hear that with what you have here."

Now I know why I do all my banking online. Pity I can't feed a cheque into my PC!

patwa_2

Just wondering, how does having the interest paid monthly risk the capital? Apart from the fact it won't grow, as whatever is gained through interest is immediately transferred out again, but how does that risk what is left? You're not eating into the original investment as it's only the interest that's being consumed.

Confused.

Cheers and take care.

Hussein.

jem16

Basically inflation is eating into your capital. £80k savings today, although still £80k in 10 years time, would not have the same value and would not buy as much.